Obamacare Subsidy Ruling could Further Delay the Employer Mandate

Two court rulings issued this week taking opposing views on the legality of subsidies granted to individuals who enroll in the public healthcare exchanges have the potential to further delay the employer mandate, say some legal experts.

In a 2-1 ruling issued Tuesday in Halbig v. Burwell, the 3-judge panel on the D.C. Circuit Court of Appeals ruled subsidies can only be granted to those people who bought insurance in an exchange run by an individual state or the District of Columbia, not on the federally run exchange. Just hours later, the U.S. District Court for the Eastern District of Virginia issued a contradicting opinion, saying that while the Affordable Care Act does acknowledge the “existence of state exchanges,” the law still directs the Department of Health and Human Services to establish exchanges when states fail to do so themselves.

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Employers, meanwhile, are still waiting on the Internal Revenue Service to finalize employer reporting rules and forms for the ACA’s pay-or-play mandate, set to kick in next year. “If this drags on into the fall, where there is some uncertainty as to which exchanges do or do not trigger a penalty, combined with the delay in the employer reporting forms, I could easily see the government saying: ‘Let’s hold off another year [with the employer mandate] until this all gets settled,’” says Paul Hamburger, co-chair of Proskauer’s employee benefits, executive compensation and ERISA litigation practice center in Washington, D.C.

“It’s a fundamental decision the government needs to make--whether the employer mandate applies or doesn’t apply,” says Brian Pinheiro, chair of the employee benefits and executive compensation group with law firm Ballard Spahr. “I don’t think there’s anything for employers to do, other than wait and see what everybody agrees the law is. If the D.C. Circuit opinion holds, then the employers that are in states that have federal exchanges basically don’t have any employer mandate--there’s no pay or play rules for [those] employers, which is huge.”

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